2013 (2) TMI 738 - HC - Income Tax

Summary

Issues involved: Appeal challenging the judgment of Income Tax Appellate Tribunal regarding the addition of Rs. 25,97,902 under section 68 of the Income Tax Act, 1961.

Issue 1: The Tribunal's interpretation of section 68 to confirm the addition of Rs. 25,97,902.
The Assessing Officer noticed total deposits of Rs. 25,97,902 in the appellant's NRE account. The appellant claimed the amounts were loans from Shri Yakub Patel transferred from the U.K. under Habib Bank's instructions. However, the Assessing Officer did not accept this explanation, stating the appellant failed to justify the creditworthiness of the lender and the genuineness of the transaction. The CIT(A) and Tribunal upheld this view, emphasizing the lack of evidence regarding the source and creditworthiness of the deposits.

Issue 2: Disregarding relevant factors and confirming the addition under section 68.
The Tribunal found that the appellant did not furnish details of Shri Yakub Patel's bank account from which the amounts were transferred, nor establish Shri Yakub Patel's creditworthiness. The Tribunal cited the Supreme Court's decision in CIT v. P Mohankala, stating that when the explanation about the nature and source of credited sums is unsatisfactory, it can be treated as income. The appellant's claim of receiving the amounts as a loan from his brother was not substantiated.

Issue 3: Sustainability of the addition under section 68 based on evidence.
The revenue authorities and Tribunal concluded that the appellant failed to provide a satisfactory explanation for the sizable credits in his account, leading to the addition of Rs. 25,97,902 as unexplained cash credit. The Tribunal relied on the principle that when the assessee's explanation is unsatisfactory, there is prima facie evidence of receipt of money, shifting the burden to the assessee to rebut it. The appellant's assertion of receiving the amounts as a loan without further details was not deemed credible.

Issue 4: Burden of proof and dismissal of the tax appeal.
The Tribunal and revenue authorities emphasized the appellant's failure to prove the genuineness of the cash credits and the source of the deposited amount. Despite the appellant's claim of receiving the funds as a loan from his brother, the lack of supporting evidence led to the dismissal of the tax appeal. The decision highlighted the importance of providing credible explanations and evidence in such cases.

This judgment underscores the significance of substantiating claims with concrete evidence and satisfying the burden of proof in tax matters, particularly concerning unexplained cash credits under section 68 of the Income Tax Act, 1961.